Rocco Triulcio v Chase Property Investments Pty Ltd (No 2)

[2004] NSWSC 399

CITATION:	Rocco Triulcio v Chase Property Investments Pty Ltd (No 2) [2004] NSWSC 399
HEARING DATE(S):	06/05/04
JUDGMENT DATE:	12 May 2004
JUDGMENT OF:	Gzell J
DECISION:	Cross defendant directors ordered to pay the plaintiff's costs of the proceedings
CATCHWORDS:	PROCEDURE - Costs - Whether the Supreme Court Rules 1970, Pt 52A r 4(2) or the Corporations Act 2001 (Cth), s 1335(2) preclude the court from ordering non-party directors to pay the plaintiff's costs of originating process to wind up companies - Directors were cross defendants on a claim for compulsory acquisition of the plaintiff's shares - Whether the directors were parties to the proceedings - Whether an order for costs should be made against the directors
LEGISLATION CITED:	Supreme Court Act 1970 Corporations Act 2001 (Cth) Federal Court of Australia Act 1976 (Cth) Supreme Court Act 1986 (Vic)
CASES CITED:	Knight v F P Special Assets Ltd (1992) 174 CLR 178 Leicster v Walton, unreported, CA (NSW), 22 November 1995 Re Wridgemont Display Homes Pty Ltd (1992) 39 FCR 193 Australian Forest Managers Ltd (in liq) v Bramley (1996) 65 FCR 13 UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd [1999] 1 VR 204 Morgan v Morgan Insurance Brokers Ltd (1993) 11 ACLC 3 Cadwallader v Bajco (2002) 41 ACSR 58 Disney Davidson Holdings Pty Ltd v Safetycare Australia Pty Ltd [1999] VSC 321 Re Land & Property Trust Co plc [1991] BCC 449 Re Record Tennis Centres Ltd [1991] BCC 509 Re Tajic Air Ltd [1996] 1 BCLC 316
PARTIES :	Rocco Triulcio - Plaintiff/ First Cross Defendant Chase Property Investments Pty Ltd - First Defendant/ First Cross Claimant Chase (No. 1) Property Investments Pty Ltd - Second Defendant/ Second Cross Claimant Chase (No. 2) Property Investments Pty Ltd - Third Defendant/ Third Cross Claimant Chase (No. 3) Property Investments Pty Ltd - Fourth Defendant/ Fourth Cross Claimant M.T. Management Pty Ltd - Fifth Defendant/ Fifth Cross Claimant Rombade Pty Ltd - Sixth Defendant/ Sixth Cross Claimant Get'm Pty Ltd - Seventh Defendant/ Seventh Cross Claimant Sant Victoria Pty Ltd - Eighth Defendant/ Eighth Cross Claimant Mancinis Victoria Pty Ltd - Ninth Defendant/ Ninth Cross Claimant Bakaras Australia Pty Ltd - Tenth Defendant/ Tenth Cross Claimant Anthony Stephen Elias - Second Cross Defendant Bartholemew James Elias - Third Cross Defendant Daniel Joseph Elias - Fourth Cross Defendant Gregory David Elias - Fifth Cross Defendant Elias Holdings Pty Ltd - Sixth Cross Defendant Carmelo Antonio Giorgio - Seventh Cross Defendant
FILE NUMBER(S):	SC 3778/03
COUNSEL:	Mr V R W Gray - Plaintiff/ 1st Cross Defendant Mr D A Smallbone - 1st to 10th Defendants/1st to 10th Cross Claimants
SOLICITORS:	Abbott Tout Solicitors John de Mestre & Co Solicitors David M Carson Solicitors

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

GZELL J

WEDNESDAY 12 MAY 2004

3778/03 ROCCO TRIULCIO v CHASE PROPERTY INVESTMENTS PTY LTD (NO 2)

JUDGMENT

1 The plaintiff was successful in seeking the winding up of the defendants. He was also successful in having a cross claim dismissed. The cross claim sought an order that his shares be sold to such of the other cross defendants as wished to participate in the purchase. With one exception, the other cross defendants were directors of the defendant cross claimants. The exception was Elias Holdings Pty Ltd.

2 The plaintiff sought an order for costs against the other cross defendants or, alternatively, the other cross defendants with the exception of Elias Holdings. It was submitted that it would be unfair for an order for costs to be made against the defendants in which the plaintiff held a 45% interest.

3 The Supreme Court Act 1970, s 76 provided that subject to that Act and the rules and subject to any other Act, costs should be in the discretion of the court which should have full power to determine by whom and to what extent costs were to be paid. Such a power enables a court to visit an order for costs against a non-party (Knight v F P Special Assets Ltd (1992) 174 CLR 178).

4 Knight is also authority for the proposition that, to the extent to which the rules provide for the award of costs, the scope of the power in the Supreme Court Act 1970, s 76 is reduced (see also Leicster v Walton, unreported, CA (NSW), 22 November 1995).

5 The Supreme Court Rules 1970, Pt 52A r 4(2) provided, subject to exceptions irrelevant for present purposes, that the court should not in the exercise of its powers and discretions under the Supreme Court Act 1970, s 76 make any order for costs against a person who was not a party.

6 The Corporations Act 2001 (Cth), s 1335(2) provided that the costs of any proceedings before a court under that Act were to be borne by such party to the proceedings as the court, in its discretion, directed.

7 If the reference to any other Act in the Supreme Court Act 1970, s 76 included an Act of the Commonwealth parliament, the Corporations Act 2001 (Cth), s 1335(2) applied. If not, the Supreme Court Rules 1970, Pt 52A r 4(2) applied.

8 In Re Wridgemont Display Homes Pty Ltd (1992) 39 FCR 193 and in Australian Forest Managers Ltd (in liq) v Bramley (1996) 65 FCR 13 it was held that the forerunner of the Corporations Act 2001 (Cth) was another Act for the purpose of the costs power in the Federal Court of Australia Act 1976 (Cth), s 43(2) and that the forerunner of s 1335(2) of the former Act was mandatory.

9 In UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1998) 28 ACSR 444 a different view was taken of the Victorian legislation. It was decided that any other Act for the purpose of the costs power in the Supreme Court Act 1986 (Vic), s 24(1) applied to past legislation and, so far as future legislation was concerned, it was a question whether or not a contrary intention appeared. It was held that the forerunner of the Corporations Act 2001 (Cth), s 1335(2) did not evince a contrary intention.

10 It is unnecessary for me to enter upon this dispute because whether the Supreme Court Rules 1970, Pt 52A r 4(2) or the Corporations Act 2001 (Cth), s 1335(2) applied, the court lacked power to grant an order for costs against non-parties.

11 The question arises whether the cross defendants other than the plaintiff were parties to the proceedings. For this purpose, is the cross claim to be treated separately from the originating process?

12 Because the Supreme Court Act 1970, s 76 is couched in broad terms and has been held to encompass power to award costs against non-parties, any limitation on that power should, in my opinion, be construed narrowly.

13 Both the originating process and the cross claim were before the court and heard at the one time, no distinction being made in the evidence as to one or the other. In my view both constituted the proceedings with the consequence that the cross defendants were parties to the proceedings and neither the Supreme Court Rules 1970, Pt 52A r 4(2) nor the Corporations Act 2001 (Cth), s 1335(2) deprived this court of power to order payment of costs by the cross defendants other than the plaintiff.

14 The cross defendants other than the plaintiff submitted that it was an odd result that costs could be awarded against directors if they were made parties to a cross claim but could not be awarded in the ordinary case of proceedings against their companies.

15 I do not find this to be an odd result. Essentially, the differences in dispute were between the directors, the plaintiff with his minority interest on the one hand and the Elias family with their majority interests on the other. Their joinder as cross defendants reflected the irretrievable breakdown in the relation between the two families that led to the proceedings.

16 In Morgan v Morgan Insurance Brokers Ltd (1993) 11 ACLC 3,126 a majority shareholder was blocked by the board of directors from transferring a share to his daughter. He claimed rectification of the register. Millett J, as he then was, held it to be a strong case for seeking an order for costs against the co-directors.

17 Where the real dispute was between directors, orders for costs against the unsuccessful directors rather than the company were made in, for example, Cadwalladerv Badjco (2002) 41 ACSR 58 and Disney Davidson Holdings Pty Ltd v Safetycare Australia Pty Ltd [1999] VSC 321.

18 It was submitted that no warning was given prior to judgment that this type of order would be sought against the cross defendants. I adjourned the application to allow the cross defendants to consider their position. No application was made at the adjourned hearing of the application for costs to re-open to call any further evidence or to take any other course.

19 It was submitted that the circumstances necessitating the winding up of the defendants was the irretrievable breakdown of the relationship between the plaintiff and the Elias family and it was not held that all the circumstances arose from the conduct of the Elias family.

20 In my view the significant issues in the case were attributed to the conduct of the Elias family. Mr Anthony Elias was the director responsible for the provision of information from which the defendants prepared their accounts. He controlled that information to the exclusion of the plaintiff who was excluded from the financial affairs of the companies. I found no reason to doubt the evidence of Vanessa Tran that Mr Anthony Elias had taken $307,000 in cash from the seventh defendant. I found the accounts under Mr Anthony Elias’ control to be unreliable in specific but significant instances as, for example, the Mangano share purchase and the Lewarne & Goldsmith accounts. I found that the accounts were in such a state that they could not be utilised to determine the proper value of the plaintiff’s shareholding and, in consequence, the compulsory purchase of the plaintiff’s shares, advocated by the Elias family, was an inappropriate form of relief.

21 My attention was drawn to the proposition that an order for costs against a non-party will only be made in exceptional circumstances (Re Land & Property Trust Co plc [1991] BCC 459, Re Record Tennis Centres Ltd [1991] BCC 509, Re Tajic Air Ltd [1996] 1 BCLC 317).

22 This is not a case in which the directors were non-parties. They were cross defendants. However, I accept the proposition that a court should approach with caution an application to visit costs against the directors of a company rather than the company itself. In the circumstances of this case, however, I am of the view that such an order should be made. I do not, however, see any basis for including Elias Holdings in the order.

23 I will order the second, third, fourth, fifth and seventh cross defendants to pay the plaintiff’s costs of the proceedings including all reserved costs.

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Last Modified: 05/17/2004